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Reed Hastings (Credit: Ben Lucier)

It's easy to mock the Securities and Exchange Commission for its clueless attempt to create a disclosure-violation case out of a very mundane Facebook posting last year by Netflix chief executive Reed Hastings. This week, the SEC finally said, in effect, "Never mind" -- evoking titters from beat reporters at Forbes, The New York Times and tech-focused organizations such as VentureBeat.

The specific facts of the Netflix/Hastings case made the SEC's position seem especially silly. Hastings' Facebook page, with its 200,000 followers, was more widely viewed than most of the official disclosure channels that the SEC likes. It wasn't as if Hastings tipped off only a privileged elite. Besides, the substance of his post -- letting people know that Netflix had finally topped one billion hours in total programming -- merely confirmed a number that another company executive had already shared as being imminent in congressional testimony a week before.

So the SEC backed down. Its new position, which sounds more sensible, is that companies and their top executives can use social networks to disseminate news, as long as they let investors know ahead of time who will be doing the talking on which social networks. Specific language on these new requirements is is being added to a 2000 law, Regulation Fair Disclosure.

But if the SEC is really smart, it will realize that its fundamental definition of "material information" to investors has fallen behind the times. As I wrote in a December 2012 post, any company with an active Internet presence -- which means just about any company that has moved beyond inkwells and telegrams -- is creating constant digital footprints, large and small, concerning every aspect of its business.

Consider the ways that companies' own websites reveal details about pricing strategies and likely new hires. Every now and then, a discerning investor can learn a lot by combing through timely parts of a company's website or following people's Twitter streams. If you discover that an airline is boosting fares on major routes, or a bank is seeking 50 Ph.D.s in London with experience in high-volume algorithmic trading, that could be market-moving news.

Current securities law isn't designed for a new world where thousands of minor updates a day gradually coalesce into insights that matter. Back in the 1960s or 1980s, material news consisted of obvious headline material such as a takeover bid or a major earnings surprise. So the SEC created strict rules that such news needed to be disclosed quickly, publicly and even-handedly via press releases and regulatory filings. Today, online flickers of news are so constant and incremental that the old-style regimen is losing relevance.

Top-tier hedge funds roam the Internet all day long, looking for company-generated tidbits with investor relevance. Something as obscure as an executive updating her or his LinkedIn page could be valuable; that's often a sign of a future job-hunter stirring into action. The world of investment research is evolving far faster than the SEC's ability to modernize its rulebook. Listing every conceivable website or social network that might occasionally hold material information is a way of conforming to the letter of disclosure law, while deluging investors with so much chaff that no one benefits at all.

Expect the SEC to struggle with the deeper issues of the Netflix situation for many years to come. Expect diligent investors to be able to tap into more information than their lazier or less well-trained peers. That's just the way markets work. Because so much information is free and quickly findable online, the Internet itself is probably doing more to create a level playing field than anything the SEC might add.